The dark days of mutual funds are here. Gone are the days when mutual funds were used to attract all types of investors, who were willing to take the risk and invest in the market. These days, mutual fund houses are solely targeting affluent and big cities, ignoring the sizeable market available in small towns and villages. It has thus, failed in its primary objective of promoting equal purchasing capacity amongst investors, showing disparity in the sale of mutual funds.
One of the major reasons for this trend is that it is widely perceived that mutual funds are solely for middle-income and high-income groups, and not for low-income groups. Although their level of penetration has been quite low in rural villages and towns, it does offer a large and developing market base, which can prove beneficial for mutual fund houses in the long run. It is therefore critical for mutual fund houses to tap this growth and use it to the best advantage of all its stakeholders. Otherwise, this may prove to be a practice against the interests of investors, amongst other anti-investor practices like entry loads. It must be made imperative for mutual fund houses to refrain from avoiding any consumer group, as it may prove detrimental against its own group. With growing worry from the Central Bank of the country on the involvement of mutual funds in sensitive areas like real estate, it may not be a surprise if these funds undergo close scrutiny of their activities. Thus, for mutual fund houses to grow more comprehensively, it is crucial to attract customers from all income groups, so as to enhance the accessibility of mutual fund houses as viable sources of investments. Only then can we see a larger growth of mutual funds as profitable securities in the Indian market scene.
With the recent SEBIs judgments of abolishing entry fees, most Mutual Funds’ distributors have lost the motivation of selling such assets. Instead they have opted for selling ulip linked insurance policies etc. But what is mostly required on a large scale is to educate the people regarding the benefits of investing in such assets. Most people are still in the gray area that if they invest in Mutual funds or on a broader term – the share market, they are risking their hard earned money. The possibility of wiping out their savings in the eventuality of a market crash and pushing one’s self to opt for loans like personal loan, home loan etc., is something that scares most potential investors off. But, that is not always possible. With wise and sound judgments, one can avert such mishaps. What should be understood is that, mutual funds investments are not investment assets that neither take investors to heights of anxiety and tension nor are they assets that can be taken lightly.
The basic important points remain the same – Make sure you obtain knowledge of the market especially from primary sources. List out your financial requirements which will help you know as to what your goals are and what the purpose of your investment is. Do not put all your eggs in one basket. Diversify your investments. It is mandatory for you to invest certain amount of funds into various categories of assets like small cap, small-mid cap, mid cap, mid-large cap etc. With that you will be able to gain across all market gains. And if in case any industry faces a slump, then investments into other assets can help your returns on the whole. And lastly, it is very important for you to be patient. Market fluctuations and shocks happen on a daily basis. But it is very important for you to be patient as these fluctuations are bound to be corrected in the long term.